Ezion Holdings

[specuvestor]

IIRC interest expense has already been reduced to 0.5% post restructuring last year.

Post briefing this morning, think secured lenders are taking around 60% haircut as US$916m is paid with US$200m cash and US$180m shares.

With monies to fund working capital, think should be net positive equities

[Stocker]

https://www.theedgemarkets.com/article/e...ive-yinson

Ezion purchase price looks attractive for Yinson



Yinson Holdings Bhd
(April 2, RM4.59)

1. Maintain buy with a target price of RM5.54:[b] [/b]Yinson Holdings Bhd has proposed to take over Ezion’s existing debt (amounting to US$916 million [RM3.74 billion]), whereby the total amount would be convertible into equity. Cash outlay is estimated at US$200 million, but our calculations indicate that on an all-in basis, the deal would be book value accretive. We are slightly positive about the proposed exercise given its long-term value unlocking potential, coupled with possible turnaround in earnings.
   

Through paying for an enterprise value of about US$800 million, Yinson would be able to gain control of Ezion’s suite of assets including: i) 12 lift boats; ii) 17 jack-up rigs (13 drilling rigs, three accommodation rigs, and one mobile offshore production unit); and iii) 35 vessels (nine tugboats, two landing craft, 19 barges, and five offshore support vessels).
Based on Eversendai Corp Bhd’s last contract for construction of two lift boats worth RM580 million back in 2014, each was valued at about US$72.5 million. Assuming USS60 million per unit due to the weaker market outlook, total lift boat assets on Ezion’s book would be worth US$720 million, valuing the rest of the assets at only about US$80 million. Therefore, we believe the purchase price looks attractive for Yinson, given the gradual improvement in the upstream sector outlook.
Upon successful conversion of debt into ordinary shares, the deal would actually be book value accretive to Yinson, with net addition of US$539 million to its total equity value (after Ezion recapitalisation). This assumes it uses the US$150 million debt financing for the cash outlay. That aside, the group targets to achieve US$120 million earnings before interest, taxes, depreciation and amortisation in 18 months after the acquisition. This assumes that lift boat utilisation is ramped up to 92%, with other asset utilisation assumed to be similar to 2018, which could lead to recurring profit base of US$30 million per annum. This could provide a 31% boost to our financial year 2021 forecast earnings, assuming that Yinson owns 70% of Ezion after deal completion. Assuming 10 times price-earnings ratio, it could add another 36 sen per share to the group’s fair value on a net debt basis. — RHB Research Institute, April 2

[TerryT]

Assuming all shares option exercised and market price of S$0.055, ezion will have a market cap of S$1.63b.

Roughly S$270m of working capital. Left roughly S$665m of debts


Really a big shave off from ezion's shoulders, but not those who bought at high price...

[Stocker]

Assuming all shares option exercised and market price of S$0.055, ezion will have a market cap of S$1.63b.

Roughly S$270m of working capital. Left roughly S$665m of debts


Really a big shave off from ezion's shoulders, but not those who bought at high price...

Hi Terry , what would be the estimated shareholder fund be ?

[TerryT]

Hi bro,


Pls take my words/ calculations w pinch of salt. And I have no vested interest.

Based on FY2018, assuming Yinson exercised it's right of the full US$916m debt, S$203.3m from share options.

Positive Equity = S$1,095,984,000 (about S$0.037 per share)

I believed they may reverse part of impairment if the deal went through . But all this is just paper calculation

** how to value eziin's asset? which currently still not performing well with uncertainty,.
** but with well performed Yinson emerged as controlling, provide eziin not just financial buoy but also future optimism

[Stocker]

Hi bro,


Pls take my words/ calculations w pinch of salt. And I have no vested interest.

Based on FY2018, assuming Yinson exercised it's right of the full US$916m debt, S$203.3m from share options.

Positive Equity = S$1,095,984,000 (about S$0.037 per share)

I believed they may reverse part of impairment if the deal went through . But all this is just paper calculation

** how to value eziin's asset? which currently still not performing well with uncertainty,.
** but with well performed Yinson emerged as controlling, provide eziin not just financial buoy but also future optimism

Thank you Bro Terry for your sharing

[Stocker]

https://www.dbs.com.sg/treasures/aics/te...52019.xml#


[b]Yinson’s investment through debt buyout
[/b]
Ezion announced that Yinson Eden Pte Ltd, a wholly-owned subsidiary of Malaysia-listed leading FPSO operator - Yinson Holdings Bhd, is in advanced stage discussions with certain lenders to [b]acquire up to US$916m[/b] of Ezion’s existing loans. 

In return, Ezion will issue Yinson up to [b]22.57bn new shares @ S$0.055 per share (+28% premium[/b] from last close), representing up to 86% of Ezion’s enlarged share capital. In addition, Yinson is also granted non-listed and transferable share options to subscribe up to 3.36bn shares in Ezion @ S$0.0605 (lifting its stake to ~87.5%).

[b][b]Key takes on the proposal
[/b][/b]

1. [b]What will be Yinson’s stake in Ezion? [/b] Ezion will issue up to 22.57bn new shares @ S$0.055 to Yinson, making up ~86% of Ezion’s enlarged share capital, of which Yinson will hold no less than a 70% stake. Tentatively, the balance of up to 16% stake will be used for banks’ debt-to-equity conversion.
   
   
   
2. [b]How much is Yinson forking out?[/b] Yinson is paying up to US$380m consideration, consisting of US$200m in cash (funded by US$50m internal funds and US$150m borrowings) and approximately US$180m in Ezion shares (which is a ~16% stake out of its ~86% interests in Ezion) to secured lenders.
   
   
   
3. [b]What is the implied valuation?[/b]  Post transaction, Ezion’s NAV is estimated to be ~US$680m or S$0.035 per share. Hence, Yinson’s consideration implies valuation of approximately 0.4x NAV. 
   
   
   
4. [b]What is the rationale?[/b] The rationale of the deal is primarily based on the liftboat business. Management believes that Ezion has a very strong standing on this front as Ezion has one of the biggest and youngest fleets of liftboats. Yinson believes this is a low entry point to Ezion, which provides an avenue to consolidate the offshore support vessel market in the region. 
   
   This also opens doors for its venture into the offshore windfarm market in line with Yinson’s strategy to set foot in the renewable sector. Although Ezion would only act as a contractor of windfarms for now, Yinson plans to vertically integrate and eventually be the owner of the PPA or wind farm infrastructure.
   
   In addition, Yinson has plans to carve out its floating production business as a separate listing. Yinson will transform into an energy infrastructure player with a three-pronged business – Floating Production, Renewable, and Offshore Marine.
   
   
   
5. [b]Turnaround of Ezion’s business?  [/b]All liftboats are currently contracted but only 50% are utilised/deployed due to working capital constraints. [b]Utilisation is expected to recover fully after the corporate exercise[/b].
   
   
   
6. [b]Impact on Ezion’s gearing level?[/b] After the corporate exercise, Ezion will have a [b]cleaner balance sheet[/b] where debt is expected to fall from US$1.3bn to ~US$400m, with minor principal repayments for six years until a huge bullet repayment. [b]Net gearing should be reduced to a healthier ~0.5-0.6x level[/b].
   Yinson aims to lower its Debt/EBITDA to around 3x, in the next 2-3 years
   
   
7. [b]What is the timeline?  [/b]The deal is conditional upon completion of due dillgence on Ezion, Debt Assignment Agreement between Yinson and lenders, waiver of mandatory general offer, and approvals from board of directors, SGX, Bank Negara Malasia, and shareholders. Shareholder EGM is expected to be held around [b]mid-June[/b] based on the current timetable. 
   
   Yinson plans to maintain Ezion’s listing status post transaction. We have yet to factor in the recapitalisation exercise in our model.
   

[AQ.]

From banks: they get 200mio cash + 180mio in Ezion shares to extinguish 916mio debt => 60-80% haircut dep how u value shares. Steepness of cut prob reaffirms my view that banks r still not willing to lend @ current oil +O&G dynamics.

From Yinson: they pay 200mio USD and get net 0.7/0.86*22.57bio = 18.37bio Ezion shares => price per share = 1.09c/ share  (i/o headline 5.5c). They also get 3.36bio share options struck 6.05c - so although OTM but there's decent time value.

From shareholders: sore pt is low entry pt of Yinson but i guess many blokes prob have worse expectations so net net prob +ve esp debt load is finally gone. At least with 23bio shares Yinson can't do a flip like Temasek.

[donmihaihai]

Ezion is paying Yinson to take over their debts by issuance of new shares and options to yinson.Total amount Yinson paying include 916min as well

[Stocker]

Ezion is paying Yinson to take over their debts by issuance of new shares and options to yinson.Total amount Yinson paying include 916min as well

Hi don , Please clarify what did you mean by '' Total amount Yinson paying include 916min as well '' ?

Thought Yinson will only come out with US$200m ?